Reference no: EM132610003

In 2018, Creative Design, Inc., instituted a quality improvement program with budgeted numbers. At the end of 2019, the management of the corporation requested a report to show the amount saved by the measures taken during the year. The actual sales and actual quality budget costs for 2019 are as follows:

                               2019 Budget                         Actual 2019

Sales                      $125,000                           $150,000

Scrap                            3,750                             3,750

Rework                            5,000                              2,500

Training program                   1,250                           1,500

Consumer complaints                 2,500                        1,250

Lost sales, incorrect labeling             2,000                          --

Test labor                                       3,000                      2,000

Inspection labor                              6,250                       6,000

Supplier evaluation                           3,750                        3,250

?Required:

Question a. Classify each cost as variable or fixed with respect to sales and compute the variable cost ratio based on the budget for 2019. Be careful-costs may change because of quality improvement, not cost behavior.

Question b. Put the cost activities above into their proper category in the Performance Report with the Actual to Budget numbers for 2019 and the variance from each cost classification.